In a rare spotlight on group insurance arrangements, Coalition Senator Andrew Bragg appeared on Sydney’s 2GB radio on Thursday evening, drawing attention to issues with superannuation insurance arrangements in a high-profile manner.
Speaking with shock jock Chris O’Keefe, Bragg criticized the delays in processing payments through the Super Complaints Tribunal (AFCA) and other consumer advocacy bodies. He expressed frustration over what he perceives as insufficient pressure from the government on regulators. “I feel like we’re not making any progress,” Bragg said. “Until we see some accountability, there won’t be any real change.”
Bragg, known for his provocative stance, is set to lead a parliamentary inquiry into superannuation, with a particular emphasis on group insurance arrangements. This comes as insurance claims handling has been identified by ASIC and APRA as a key priority for 2024 and a frequent topic of complaints to the Australian Financial Complaints Authority, the successor to the SCT.
The government has also criticized funds and insurers, with Minister for Financial Services Stephen Jones urging improvements in group insurance operations. However, Bragg remains skeptical, accusing the government of merely offering empty rhetoric. “The government is just talking and not taking meaningful action,” he said, questioning the government’s willingness to challenge the union industry super funds.
Looking ahead to the next federal election, Bragg hinted at a potential policy to mandate specific timeframes for processing death and total permanent disability (TPD) claims, suggesting that a timeline of “weeks” would be ideal. Currently, ASIC data shows the average time for death claims is 1.1 months, while TPD claims average 5.6 months, and income protection claims take around 2 months. These figures, though longer than Bragg’s proposed timeline, align broadly with the Life Insurance Code of Practice.
The Financial Services Council (FSC), which transferred oversight of the Life Insurance Code to the Council of Australian Life Insurers last year, acknowledged the need for increased scrutiny. An FSC spokesperson commented, “Data and industry case studies show that a ‘set and forget’ approach to group insurance is unsustainable. Group insurance holds a unique position in the superannuation system, and there is recognition of the need for trustees and insurers to enhance the value delivered to members.”
Compounding the scrutiny, REST, a retail worker fund, is facing a class action lawsuit. The action, led by Shine Lawyers, alleges that REST wrongfully deducted income protection insurance premiums from members without their consent between December 2008 and June 2019. The lawsuit claims that REST’s default insurance coverage was inadequate when members held multiple policies or were inactive for extended periods.
In response, REST has stated it will defend the class action in Federal Court, asserting that its default income protection cover is a valuable benefit for members who might otherwise struggle to obtain affordable coverage. A REST spokesperson defended the policy, emphasizing its importance for members who are unable to work due to illness or injury.
